Why did a leading insurance company withdraw from acquisition deal?

by Michael Mata14 Sep 2016

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Why did a leading insurance company withdraw from acquisition deal?

Though it was previously reported that Humania Assurance Inc. was interested in acquiring Genstar Capital’s 75% stake in Financial Horizons Group (FHG), Richard Gagnon, president and chief executive officer ofHumania Assurance, recently revealed that his company has decided not to proceed with the acquisition.

"It is not a run-of-the-mill situation and it's a big transaction," said Gagnon. "However, our decision not to proceed had more to do with the importance of staying focused on our game plan. Our business plan is locked in tightly for the coming years. To move forward with this transaction, that would be to risk losing our focus."

Humania Assurance Inc., a leading provider of health insurance products in Canada, wants to increase its online presence with products that are distributed by advisors. Given the singularity of his company’s vision, Gagnon said that Humania Assurance did not even reach the point of analyzing the financial arrangements available to facilitate the deal.

Not that Humania Assurance lacks access to capital markets. On the contrary, it has links with Quebec’s development capital organization, the Fonds de solidarité FTQ. The Fonds de solidarité FTQ acquired a minority stake inHumania Assurance’s share capital in 2015.

Last week, Genstar Capital announced it had decided to sell its stake in FHG. Genstar Capital currently owns 75% of FHG’s share capital, with the remaining 25% split between senior management. Genstar Capital became a shareholder of FHG in 2010.

Genstar Capital’s decision to divest its stake in Financial Horizons Group is aligned with its general investment strategy. The San Francisco-based company specializes in private investments in medium-sized companies in the technology, software, industrial, healthcare, and financial services industries.

It typically invests in companies with an EBITDA (earnings before interest, taxes, depreciation, and amortization) north of $10 million. These companies should be looking for an equity injection of between $50 million and $300 million.